Under NY Divorce Law if a spouse takes separate property and adds their spouse to the title/account marital property is created and the asset is subject to equitable distribution even if the asset was entirely owned by the one person before the marriage. How such an asset is distributed is subject to case law, statute and the court's discretion. The value of the asset will have to be determined and there are several dates that may be important: the value at the time of marriage, the value when title became joint and the value at or near the time of the divorce.
In my prior blog (Part Three) I stated that if a bank account that was separate property is put into joint name there is a presumption that marital property was created and that both parties have a 100% interest because either one can withdraw all or some of the money from the institution. However, this presumption can be "rebutted" if a defense of "convenience" can be established. Proving that the monies were put into a joint account for convenience purposes can be difficult to prove however there are cases in which it is easily proven as well.
Example One: The spouse has $100,000 in a bank savings account from before the marriage (separate property) and two years later during the marriage the couple is about to buy a home together and to have the money available for the purchase the first spouse transfers the money from the separate savings account to the joint checking account shortly before the closing of title. Most courts will agree that the transfer was made to enable the purchase check to be written and not because of a desire to create "marital property" or to make a gift of the asset to the spouse. The first spouse upon divorce will likely receive a separate property credit of $100,000.
If the money was transferred a year before the closing, well before the parties were in contract to buy a house, it will clearly be more difficult to prove as there will need to be more evidence as to the intent and reason for the transfer into the joint account.
Example Two: The parent of a spouse has become ill and for estate planning purposes, while still alive, wants to gift $100,000 to their child (the spouse who is married). The married child only has a joint bank account with their spouse. The married child gets the money from their parent and deposits it into the joint account with their spouse and then two weeks later opens a new account in singular name only and transfers the $100,000 into the single named account. Upon divorce even though the money was for a brief period in a joint account most judges will allow a convenience defense to succeed and the recipient child will have a determination in their favor for the $100,000.
Example Three: The spouse that has the separate property during the marriage puts the money into a joint account because they are in a high risk job or are facing serious medical problems and want to make sure that in case of their disability or inability to access the account that their spouse will have a source from which to pay marital bills and maintain the status quo. For example, a police officer or fireman who faces risk of injury or death everyday may want to make sure that there is access to what would have been a separate property account and therefore would have been unavailable if only in one person's name. If the normal income of the family is insufficient and the spouse who "owned" the account pays larger or even ordinary bills by sometimes withdrawing money from the account or by approving the other spouse writing a check or withdrawing money, the court may find that it was under the control of the one spouse and only used by that spouse or with permission. This can be difficult to prove but if it makes sense to the court and the parties' actions are consistent with the usage of the account the presumption that it is joint property may be defeated.
Determination of separate vs marital property is not easy as it is both fact based and law based. Additionally, having documents to prove or disprove the claims can be critical. Being able to testify in a way that is consistent with the documents or the actions taken during the marriage is also very important to success. As always, being guided by an experienced matrimonial attorney is very important when facing complex challenges.